Political dividends

A law passed by Congress earlier this year aimed at policing its members and restoring public trust is so laced with loopholes that it continues to exempt Congress from rules everyone else plays by.

A law passed by Congress earlier this year aimed at policing its members and restoring public trust is so laced with loopholes that it continues to exempt Congress from rules everyone else plays by.

So found The Washington Post, which reported that “130 members of Congress or their families have traded stocks collectively worth hundreds of millions of dollars in companies lobbying on bills that came before their committee.”

The newspaper found that nearly 1 in 8 trades made by the 130 members coincided with legislation that affected 323 companies. The transactions collectively were worth as much as $218 million, and were made from 2007 to 2010.

This practice is still allowed under the Stop Trading on Congressional Knowledge (STOCK) Act, which aimed to end apparent insider-trading and conflicts of interest on Capitol Hill. Generally, it prohibits members of Congress from using specific confidential information gained in the course of their work to guide their trades and profit in the stock market. It also requires lawmakers to disclose trades every 45 days instead of annually.

For ordinary Americans, insider trading is illegal; it’s what landed Martha Stewart in Alderson Federal Prison Camp. But before the STOCK Act, Congress wasn’t explicitly bound by the rules that apply to nonpoliticians.

The devil, of course, is in the details; it is there that STOCK falls short. Using “nonpublic” information to profit in stocks is now forbidden; but trading in companies that come before Congress and can benefit from “public” legislative action is still permitted. This is a distinction without a difference.

Congress has prohibited top executive-branch officials from trading in stocks in industries they oversee and influence, while exempting itself from such a clear rule. “The lawmakers can still invest in firms, even as they create laws that can affect the bottom line of the companies,” the Post reports.

Members argued that imposing this restriction would have been too complicated: Many have extensive portfolios, some of which are managed by spouses or others, and thus lawmakers might not realize that they are trading in stocks in industries or companies that come before them and could benefit from their work.

The answer to this is simple: Set up a blind trust. The Washington Post said only six members of the Senate have blind trusts approved by the ethics committee. (The House doesn’t keep a count.) Others apparently expect Americans just to trust them. That hasn’t worked.

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